Trustees are ultimately responsibility for their scheme’s financial statements. Therefore, it is critical that trustees are certain of the quality of the audit process that has taken place on those financial statements by evaluating the performance of the audit team, the quality and honesty of their communications with trustees and scheme management and the auditor’s independence and objectivity.
We have set out below some questions that trustees should consider asking their auditors to ensure that they receive a robust and value-for-money service:
Audit planning meeting or before the audit starts
- What is the planned scope of your audit? Wha balances and transactions will you be auditing?
- How does this differ from last year?
- Are there any concerns with how the administrators/pensions department control key scheme processes?
- What criteria do you use to determine materiality?
- Are there any activities that will not be audited that present operational or financial risks but are not viewed as material?
- How can your planned approach be relied upon to detect material frauds, errors or weaknesses in internal controls?
- Are there any areas the trustees or scheme administrator/pensions department could be of greater assistance to reduce the amount of time spent by you (and hence, reduce your fees)?
- Who will be carrying out the audit and what experience of pension schemes do they have?
- How much involvement will there be from the engagement leader?
- Are there any proposed changes to the Pensions SORP or accounting standards that will affect the scheme’s accounts this or next year?
- How do you ensure you are independent?
Audit reporting meeting or before the trustees sign the accounts
- Did the scope of the audit vary from that planned and how did it vary?
- Did you find any areas of the control environment that concerned you? If so, what are they and what are your recommendations for rectifying any issues?
- Have weaknesses in internal controls reported by you last year been rectified?
- Was the scheme administrator/pensions department receptive to your recommendations in respect of internal controls?
- Did the administrators/pensions department try to impose any limitations on your work?
- Did you detect any material frauds or errors and what were they?
- Are there any unresolved issues for your audit?
- Did you have enough time to complete your work?
- Is your audit opinion unqualified? If not, why?
Is your statement about contributions unqualified? If not, why?
- Were there any disagreements over accounting, auditing or reporting matters between you and the scheme administrators/pensions department and accounts preparers?
- How did you satisfy yourselves as to the reasonableness of the annuity/buy-in policy valuations?
- How do our accounting policies compare to industry best practice?
- What is your assessment of the integrity and competence of the scheme administrator/pensions department?
- How do your costs compare to the estimated fees?
- What are the advantages to the trustees of continuing with your firm as scheme auditors?
By necessity, this briefing can only provide a short overview and it is essential to seek professional advice before applying the contents of this article. This briefing does not constitute advice nor a recommendation relating to the acquisition or disposal of investments. No responsibility can be taken for any loss arising from action taken or refrained from on the basis of this publication. Details correct at time of writing.
This article was previously published on Smith & Williamson prior to the launch of Evelyn Partners.